In the context of securities investments, tracking insider trading has always been considered a prudent exercise. Typically defined as company directors, officers, and other individuals owning more than 10% of its stock, insiders are people who know more about a company's earnings estimates and events affecting it than anyone else. Obviously, by investing their own money, insiders clearly expect to make an above average return when they acquire their own stock in a concerted manner.
Generally speaking, trading securities, or communicating such information to others who trade, based on material non-public information is illegal. Thus, the Securities and Exchange Commission requires insiders to file records of their trading in the company's stock by the tenth day of the month following the trade, at the very latest.
This “Statement of Changes of Beneficial Ownership” or Form 4 for short, lists the number of shares bought or sold, the nature of the transaction, whether direct market or otherwise, and the current holding. Similarly, a Form 3 is filed by an individual establishing an insider position in the company's stock for the first time, and a Form 13D is required to be filed by investors within 10 days of their establishing a 5% stock position in any company. Company directors are required to report their intention to sell unregistered stock under SEC Rule 144.
Clearly, monitoring these SEC filings and information pertaining to the actions of insiders and other investment traders can prove rewarding under certain circumstances. Accordingly, a need exists for a system, method, and computer readable medium containing instructions utilizable for efficiently disseminating such insider and/or investment trader information to the public. With access to this information, the public can make their own assessments and invest accordingly.
Several systems exist in the prior art for providing such information. One example includes on-line databases which track insider holdings, trades, outsider interests, and other investment trader actions. These databases typically list information provided by government agencies such as the SEC within a day or two after publication, and can be a helpful guide to a stock's or other investment's price movement.
While adequately providing access to SEC filings, these on-line databases nevertheless fail to provide any additional insight on the insider's or trader's actions. For instance, the actions of certain insiders or traders may prove to be more reliable in predicting an investment's price movement than other insiders or traders. Thus, a need exists for a system, method, and computer readable medium containing instructions utilizable for providing not only information concerning an insider's or trader's actions, but also information pertaining to the reliability of a particular insider's or trader's actions.
Several prior art techniques have not adequately addressed these needs. For example, U.S. Pat. No. 5,132,899 to Fox discloses a stock and cash portfolio development system. As depicted in prior art FIG. 1 of the present invention (FIG. 1 of Fox), the system of Fox uses data gathering and processing methodology to produce a system where a list of stocks and a cash position is generated and purchased for investment and operating accounts (steps 1-5). Specifically, the system integrates three areas of data: investment performance for investment managers; Federal Securities and Exchange Commission reports filed quarterly by investment managers; and financial characteristics for a number of stocks, to produce a stock portfolio.
Similarly, U.S. Pat. No. 4,566,066 to Towers relates to a securities valuation system. As shown in prior art FIG. 2 of the present application (FIG. 1 of Towers), the system of Towers, comprised of components 10-23, produces securities portfolio valuation schedules for multiple simultaneous users. In Towers, a customer communicates with the system through terminal 10 to access and edit accounts in user file 12. By using a CUSIP routine 18 and an AMOUNT routine to reflect stock splits and dividends since the last stock pricing, the system of Towers produces and displays 23 a selected stock portfolio valuation.
In U.S. Pat. No. 5,812,987 to Luskin et al., an investment fund management system manages assets in one or more investment funds over a specified period of time. This system, comprised of components 31-39, determines a strategic investment mix of assets in a particular fund periodically as a function of changing risk. Each fund is managed by manipulating the investment mix of the fund in accordance with criteria related to a diminishing length of time to a horizon where cash will be withdrawn therefrom. In prior art FIG. 3 of the present invention (FIG. 6 of Luskin et al.), the investment mix is adjusted by first obtaining investor portfolio information 35 and market data 36. This data is used to forecast market risks and returns 37, and to determine the portfolio risk 38. Then, the anticipated cash flow stream 39, the discount function 34, and present value of future cash flow 33 are calculated before producing an optimized portfolio 32 of assets.
In U.S. Pat. No. 5,761,442 to Barr et al., a data processing system selects securities and constructs an investment portfolio based on a set of artificial neural networks (prior art FIG. 4 of the present application, FIG. 2 of Barr et al.). The system comprises components 40-70 and is designed to model and track the performance of each security in a given capital market and output a parameter which is related to the expected risk adjusted return for the security. Each artificial neural network is trained using a number of fundamental and price and volume history input parameters 10, 20, 30 about the security and the underlying index. The system combines the expected return/appreciation potential data 50 for each security via an optimization process 60 to construct an investment portfolio which satisfies aggregate statistics. The data processing system receives input from the capital market and periodically evaluates the performance of the investment portfolio, rebalancing whenever necessary to correct performance degradations 70.
However while many of these prior art references disclose adequate methods of managing investment funds and portfolios, none of the above make any mention of evaluating an insider's or other investment trader's performance. Hence, what is lacking in the prior art is a technique directed not only toward an investment fund, but rather a technique for evaluating insiders and other traders based on their actions as well. Accordingly, a need exists for a system, method, and computer readable medium containing instructions utilizable for not only disseminating information concerning an insider's or trader's actions, but also for evaluating the insider's or trader's performance.
In line with the above, a need exists for a system, method, and computer readable medium containing instructions utilizable not only for providing raw information and data but also utilizable for evaluating performance based on returns observed after decisions concerning buying and selling activity, historical consistency at picking good entry and exit points, and/or the number of buying or selling decisions made by the insider or investing entity.
Furthermore, a need also exists for a system, method, and computer readable medium containing instructions utilizable for not only evaluating performance with respect to substantially all other insiders and traders but also with respect to substantially all other insiders and traders in a particular industry.